“Rule of Law” is both a play on my name, and a statement of my values. The rule of law is a foundation for both our liberties and for order. The rule of law respects us as equals. It allows us to organize our lives, plan our futures, and resolve disputes in a rational way. There are those around the world and throughout history who have fought in great struggles for the rule of law. My role is more modest. I am a lawyer at the law firm of Sabey Rule LLP who works with people, assisting them with estate planning, probate and estate administration. I also assist people in resolving disputes about wills and estates. In this blog, I write about some of the legal topics that I deal with in my law practice, and about other legal issues that interest me. In doing so, I hope that I help others learn more about law, and that I encourage discussion about law and law reform. I hope that, in some small way, I help nurture the rule of law. You may contact me at my office at #201 - 401 Glenmore Rd., Kelowna, B.C., Canada; V1V 1Z6; telephone number: (250) 762-6111; email: s.rule@sabeyrule.ca.

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Sunday, February 14, 2010

Stewart v. McLean

In British Columbia, if you act as an attorney under a power of attorney, you have a fiduciary duty (or duty of loyalty) to the person who appointed you, and on whose behalf you are acting. But the mere fact that someone makes a power of attorney does not in-and-of-itself make the person named as the attorney a fiduciary.

This issue is discussed in a Supreme Court of British Columbia decision released last January. The case is Stewart v. McLean, 2010 BCSC 64.

Mona Stewart sued her brother, Donald McLean, his wife, and his two children. Her mother, Ellen McLean, had transferred her house into a joint tenancy with her brother, Donald McLean, she had forgiven a $50,000 debt he owed to her, and she had given each of Donald McLean, his wife and two children $70,000.

After Ellen McLean’s death on February 4, 2005, Mona Steward claimed that her brother had unduly influenced their mother to benefit his family. She also argued that he and his family held the benefits on a resulting trust for Ellen McLean’s estate.

Mr. Justice Punnett rejected Mona Stewart’s claims, and held that Ellen Stewart had freely made valid gifts to her son and son’s family.

A key factor in this decision was that when Mona Stewart and Donald McLean’s uncle Hilarious West died, he had left most of his wealth to Mona Stewart and her children. Donald McLean unsuccessfully sought to have his uncle’s will declared invalid in Alberta.

Mr. Justice Punnett found that Ellen McLean had conferred substantial benefits on her son and his family in order to balance the benefits Mona Stewart received from her uncle.

In finding that there was no undue influence, Mr. Justice Punnett first considered whether there was a presumption that arose that Donald McLean unduly influenced his mother, by virtue either that Ellen McLean had appointed her son as an attorney under a power of attorney, or that their relationship was one of dominance.

Ellen McLean had made a power of attorney, in which she named her son as her attorney. But she never delivered it to him, and he did not exercise it. Accordingly, Mr. Justice Punnett found that the power of attorney did not give rise to a fiduciary duty in the circumstances.

Mr. Justice Punnett also found that Donald McLean was not in a position to dominate his mother. He wrote:

[87] I find that the deceased, up until her death, was mentally acute, independent, and strong-willed. There is no evidence that she was vulnerable in her relationship with her son nor that he controlled her in any way. She was not dependent on him. While she relied upon him to take her to appointments and stores and to assist around her home, had he been unable to do so, she was capable of making alternate arrangements as evidenced by the various third parties she hired to attend to matters that were beyond her abilities.

[88] Because of the Deceased’s independence and strong-will, Donald would have been unable to exercise any power over his mother. Even if he had some discretion or power, he would not have been able to unilaterally exercise it. I find that the relationship between Donald and his mother was not a fiduciary relationship.

Mr. Justice Punnett further held that if a presumption of undue influence arose, it had been rebutted. Ellen McLean had received independent advice from a lawyer when she transferred her house into a joint tenancy with her son, and from her financial advisor when she made the $70,000 gifts to each of her son, his wife and their children.

Mona Stewart also sought to rely on the presumption of resulting trust. She argued that because her mother made the transfer of title to the house into a joint tenancy, the cash to Donald McLean and his family, and the forgiveness of debt were all made gratuitously, there is a presumption the Donald McLean and his family held the assets they received in trust for his mother’s estate.

Mr. Justice Punnett agreed that the presumption of resulting trust arose, but found that it had been rebutted by the evidence that Ellen McLean had intended to make gifts.

Mr. Justice Punnett found that there was no basis for Mona Stewart’s allegations, in particular her allegations of undue influence. He wrote:

[120] The plaintiff’s pursuit of this lawsuit in light of the facts and her complete lack of evidence appears to have been motivated by greed and retaliation directed towards her brother for opposing probate of their late uncle’s will. It is one thing to pursue litigation based on suspicious conduct grounded in facts, which may or may not be accepted by the trier of fact; it is another to pursue it and provide no substantive evidence in support. Her allegations were unfounded and her motive improper.

The court ordered Mona Stewart to pay the defendant’s costs on a special costs basis. The usually rule in British Columbia lawsuits is that the unsuccessful party must pay costs to the successful party, but these costs generally represent only a portion of the successful party’s legal expenses. The court may award special costs, which approach or equal actual legal expenses, as a way of punishing a party for its conduct in the lawsuit.

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Rule of Law web-log is intended for general educational purposes only, and you may not rely on its contents for legal advice. Please keep in mind that the laws of British Columbia are often different from the laws of other Provinces of Canada, States of the United States of America, and other countries. Furthermore, the law changes, and what was once an accurate statement of the law, may now be outdated and inaccurate. If you have a specific legal problem or issue, please consult a lawyer who is familiar with the laws of your province, state or country. Neither reading this blog, nor sending me an unsolicited email will create a solicitor and client relationship with me.